CONFIDENTIAL AC/OCT 2012/ACC116/165/211

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE INTRODUCTION TO COST ACCOUNTING / COST

ACCOUNTING
COURSE CODE ACC116/165/211
EXAMINATION OCTOBER 2012
TIME 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:

i) the Question Paper

ii) an Answer Booklet - provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 6 printed pages
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CONFIDENTIAL AC/OCT 2012/ACC116/165/211

QUESTION 1

A. State whether the following statements are TRUE or FALSE.

a) Variable costs are costs that change in direct proportion with activity.
b) Rent, electricity and insurance are grouped under direct expenses.
c) The purpose of cost accounting is to provide detailed information for control,
planning and decision making.
d) Total direct cost is known as prime cost.
(4 marks)

B. Differentiate between Cost & Management Accounting and Financial Accounting in

terms of the following criteria:

a) User orientation
b) Information time frame
c) Statutory requirement
(6 marks)

C. a) Costs can be classified depending on the purposes for which costs are
required. State four (4) ways to classify costs.
(2 marks)

b) Classify the following costs according to the behavior of costs.

Milk for ice cream production

i. Rent of factory
ii. Advertising
v. Depreciation of machinery
v. Electricity bill
vi. Ink for printing shop
(6 marks)
(Total: 18 marks)

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QUESTION 2

A. Sara Textiles House is concerned about the stock level of their textiles that appears
to be too low. The textiles are currently ordered in quantities of 200 rolls per order at
a cost of RM800 per roll. The demand for the textiles is constant at 1,000 rolls for
each quarter. In preparing the order, the firm incurred RM125 for freight and
forwarding cost per order. Immediately after receiving the textiles, Sara Textiles
House insured the textiles at 4% of the inventory value. Storage cost is RM8 per roll.

a) Calculate the economic order quantity (EOQ) for the textiles.

(3 marks)

b) Calculate the annual savings that could be made using the EOQ instead of
the current policy of ordering 200 rolls per order.
(4 marks)

B. Soleh Bhd uses a costing system where all the purchases and issues of materials
are recorded in the store ledger card. The company maintains its stock using "Last-
In-First-Out" (LIFO) method of stock valuation. Their record disclosed that 1,000
units were in stock on 1 June 2012, valued at RM15,000.

The following information relates to the store transactions for the month of June
2012.

June 3 Purchases 300 units @RM15.50

6 Issues 700 units
9 Purchases 600units@RM16.00
12 Purchases 400 units @RM16.50
15 Returned 150 units to the supplier. These
materials were purchased on 9 June 2012
18 Issues 1,000 units
24 Purchases 500 units @RM 17.00
27 Issues 600 units

On 30 June 2012, the physical stock count shows stock balance of 300 units.

Required:

Show how the above transactions are recorded in the store ledger card using the
LIFO method.
(15 marks)
(Total: 22 marks)

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QUESTION 3

Bidara Sdn Bhd manufactures cosmetic products; INDAH, CANTIK and MENAWAN. The
following tables showed the data for the month of May 2012 relating to the products and its
four employees. Bidara Sdn Bhd hires two types of workers, skilled and semi-skilled.
Prudence and Catriona are skilled workers and they are paid based on hourly rate of RM5
per hour. Lisa and Stephanie are semi-skilled workers and they are paid based on straight
piecework rate. The normal working hours for one week is 40 hours.

Products Rate per unit

INDAH RM2.50
CANTIK RM2.80
MENAWAN RM3.00

Employees Actual Hours Production in units

Name Worked INDAH CANTIK MENAWAN
Prudence 200 100 90 110
Catriona 191 110 85 120
Lisa 163 100 130 100
Stephanie 161 150 140 150

The semi-skilled workers are guaranteed to receive the minimum wages of RM1.000 per
month. The skilled workers are entitled for overtime payment at a premium of 100%.

Required:

a) Calculate the gross wages earned by each employee for the month of May 2012.
(14 marks)

b) What is the relevance of providing guaranteed minimum wages to the workers?

(2 marks)

c) Provide two (2) advantages and two (2) disadvantages of piecework rate.
(4 marks)
(Total: 20 marks)

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QUESTION 4

Precision Bhd has three production departments namely Machining, Welding and Assembly
and two service departments, Maintenance and Power House. The following information
relates to the company for the year 2011.

Production department Service department

Machining Welding Assembly Maintenance Power House
RM RM RM RM RM
Indirect 11,600 9,000 5,500 3,450 3,100
wages
Indirect 7,400 6,350 4,500 1,250 1,000
materials
Repair and 3,000 2,500 1,500 2,000 1,000
maintenance

RM
Other overhead costs:
Rent 20,000
Power 5,000
Heating and Lighting 2,500
Depreciation on equipment 10,000
Insurance on equipment 1,000

Additional information:

Machining Welding Assembly Maintenance Power

House
Direct labour costs RM21.000 RM18,000 RM10,000 - -
Machine hours 7,000 6,000 5,000 - -
Area (sq. feet) 200 400 300 50 50
Direct labour hours 8,000 11,500 10,500 - -
Horse power 40 30 20 5 5
No. of employees 20 10 30 20 20
Equipment value RM30,000 RM20.000 RM20.000 RM15.000 RM15.000
Maintenance (%) 20 50 20 - 10
Power house (%) 20 60 10 10 -

Required:

a) Prepare an overhead analysis sheet showing the basis for apportionment made.
(Answers are to be stated to the nearest RM).
(18 marks)

b) Calculate the overhead absorption rate for each production department.

(Machining using Machine Hours and Welding and Assembly using Direct Labour
Hours)
(2 marks)
(Total: 20 marks)

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QUESTION 5

Job No. 10, relates to an order for a customised television set. The data for Job No. 10 is as
follows:

Direct materials Direct wages Machine hours

Department AAA RM700 45hours@RM12 20 hours
Department BBB RM500 50 hours® RM15 10 hours
Department CCC RM300 20 hours @RM 10 5 hours

The production overhead absorption rates are as follows:

Department AAA RM5 per machine hour

Department BBB RM6 per direct labour hour
Department CCC 5% of prime cost

Other costs relating to Job No. 10 are:

Administrative expenses RM150

Selling and distribution expenses 15% of production cost
Hire of special machine RM550.

Required:

a) Calculate the selling price of Job No. 10 given the profit margin is 25%.
(18 marks)

b) State two (2) characteristics of job costing.

(2 marks)
(Total: 20 marks)

END OF QUESTION PAPER

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